Approved by: Robin Matthews Revision No: 02 Signature: Effective Date: 6/10/2016

Transcription

1 Compiled by: Danielle Mintoor Doc Nr: AVSBEEIP Approved by: Robin Matthews Revision No: 02 Signature: Effective Date: 6/10/2016 Introduction This document has been put together in an attempt to explain the different elements of the B-BBEE Codes of Good Practice to the reader. It aims to provide access to the scope of each Sector Charter as gazetted and a basic understanding of the Codes of Good Practice. Which industry or Sector does your company subscribe to? Sector Codes gazetted in terms of Section 9(1) of the B-BBEE Act are as follows: Agricultural Sector Code Marketing, Advertising and Communication Sector Code AVSBEEIP AVS 2016 Page 1 of 26

2 Tourism Sector Code Information & Communications Technology Sector (ICT) Integrated Transport Sector Code This sector code consists of various sub sectors, please use the following link for more information: AVSBEEIP AVS 2016 Page 2 of 26

3 Forestry Sector Code Please use the following link for more information: Property Sector Code Please use the following link for more information: AVSBEEIP AVS 2016 Page 3 of 26

4 Financial Sector Code Detailed description B-BBEE Codes 1. Who is classified as Black? All African, Coloured, Chinese and Indian persons who are citizens of the Republic of South Africa by birth or descent OR Who became citizens of the Republic of South Africa by naturalization Before 27 April 1994; On or after 27 April 1994 and who would have been entitled to acquire citizenship by naturalisation prior to that date, but did not do so because of the apartheid government. That means that if your grandmother, grandfather, mother or father was Indian, Coloured or African and looks white, you are classified as black, if proof can be supplied 2. What is a BEE Scorecard? It is a verified report /snapshot of your current status as a BEE contributor, according to prescribed elements, known as the Amended Codes of Good Practice. AVSBEEIP AVS 2016 Page 4 of 26

5 2.1.1 What are the elements of a scorecard? Ownership Priority element Who owns the company? Shareholders, Partners, Members, etc Management Control The Board and Executive Management of the Company, who are responsible for making strategic decisions and for the implementation thereof. These may be the CEO, HR Manager, Financial Manager etc. This element also relates to the allocation of black employees in Junior, Middle and Senior Management. The total number of disabled employees also falls into this category Skills development Priority element This relates to the training of your black employees, within the measured period Enterprise and Supplier Development Priority element This element relates to the Preferential procurement, Enterprise Development and Supplied Development within your company. Preferential procurement - Purchase of goods made from black owned enterprises with a valid B-BBEE certificate, or from other enterprises that hold a valid B-BBEE certificate. This is measured in the financial period under review. Enterprise development - Does your Company assist black owned businesses to develop further? Enterprise development - Does your Company assist black owned businesses to develop further? Supplier development - Does your Company assist black owned suppliers to develop further? Socio-economic development Does your Company make contributions towards the black employees, or does your Company assist black beneficiaries? Priority Elements, Subminimum and Discounting Principle There are three Priority Elements: 1. Ownership: Sub-minimum of 40% of Net value (40% of 8 points) based on Time Based Graduation factor 2. Skills Development: Sub-minimum of 40% of the total weighting points 3. Enterprise and Supplier Development: Sub-minimum of 40% for each of the three categories i.e. Preferential Procurement Supplier Development and Enterprise Development AVSBEEIP AVS 2016 Page 5 of 26

6 Large enterprise (generic) is required to comply with all the Priority Elements and QSE is required to comply with Ownership as a compulsory element, and either Skills Development or Enterprise and Supplier Development. Non Compliance with the 40% sub-minimum of any of the elements, will result in both generic and QSE entities dropping one level. This will be done by calculating the points (i.e. level) that would have been scored were it not for the non-compliance with the 40% sub-minimum. After the initial level has been calculated, this must then be discounted by one level. 2.2 What type of scorecard can you receive? Exemption Scorecard Entity with an annual turnover of R10m or less Need not be measured under any of the 5 elements and automatically a Level 4 B-BBEE recognition contributor BUT, If black ownership is 100% then the entity will achieve a Level 1 B-BBEE contributor status If black ownership is at least 51% then the entity will achieve a Level 2 B-BBEE contributor status EME is only required to obtain a sworn affidavit confirming: Annual Total revenue of R10m or less; and Level of Black Ownership ANY MISREPRESENTATION WILL CONSTITUTE A CRIMINAL OFFENCE! Qualified Small Enterprise Scorecard (QSE) Entity with an annual turnover between R10m and R50m Need to be evaluated on all 5 elements BUT, If black ownership is 100% then the entity will achieve a Level 1 B-BBEE contributor status If black ownership is at least 51% then the entity will achieve a Level 2 B-BBEE contributor status QSE is only required to obtain a sworn affidavit confirming: Annual Total revenue of R50m or less; and Level of Black Ownership This only applies to QSE s with at least 51% black ownership All other QSE entities have to go through the verification process ANY MISREPRESENTATION WILL CONSTITUTE A CRIMINAL OFFENCE! AVSBEEIP AVS 2016 Page 6 of 26

7 2.2.3 Generic Enterprise Scorecard (Generic) Entity with an annual turnover of more than R50m Needs to be evaluated on all of the 5 elements Has to go through the verification process 3. Elements of a BEE Scorecard 3.1 SOCIO-ECONOMIC DEVELOPMENT What does Socio-economic development (SED) mean? Socio-Economic Development contributions consist of monetary or non-monetary contributions actually initiated and implemented in favour of the beneficiaries by a Measured Entity with the specific objective of facilitating income generating activities for targeted beneficiaries Who may receive Socio-economic development contributions? Either black individuals or, as is more commonly the case, black communities or groups of black people The Codes state the following: What is the impact of Socio-economic development on your scorecard? Generic Enterprises: 5 points Qualified Small Enterprises: 5 points To earn full points you need to spend 1% of Net Profit after Tax (NPAT) on your black beneficiaries (Refer to steps below to determine correct NPAT). When the beneficiaries of the contribution are at least 75% Black, the total amount of the contribution will be taken into account. E.g. if the Net Profit after Tax is R1Million then the amount to be donated will be: R x 1% = R This is necessary to achieve 5 points for a Generic Entity and 5 points for a QSE Entity, assuming that the correct NPAT is used. AVSBEEIP AVS 2016 Page 7 of 26

8 What if only 30% of your beneficiaries are black? This will mean that if a contribution of R1 000 is made; then only 30% of R1 000 = R300 can be counted towards Socio-economic development. What if the donation is more than the target? Should this be the case and the Enterprise donates R , which is more than the required R10 000, the Enterprise will still only receive the maximum points. What is a benefit factor? A benefit factor is the percentage benefit you receive from contributing towards a specific type of Socioeconomic project. An example would be if the Company provides a professional service free of charge the benefit factor would be 80%. Let s assume your commercial hourly rate is R1 000, then you would have calculated your contribution to be R1 000 x 80% = R800 per hour, as your contribution towards black Socio-economic development. Refer to Examples of Socio Economic Development contributions How to know what NPAT to base the calculation on? NPAT has to be measured against the industry norm: 1. Determine the industry in which you operate 2. Obtain the most recent Industry norms from STATS SA, or enquire from AVS 3. Determine if your NPAT divided by Turnover (Profit margin) for the year under evaluation is at least a quarter of the industry norm. Example: You fall in the manufacturing industry, and the industry norm is 5.81%. The calculation would be: a quarter of the norm is 5.81% / 4 = 1. 45% your NPAT / Turnover is 1.5% You can therefore see that the Profit Margin is more than a quarter of the industry norm and therefore the NPAT as stated in the financial statements/ signed management accounts can be used to determine the target for points to be allocated. AVSBEEIP AVS 2016 Page 8 of 26

9 Refer to the figures in the table below to form the basis for the discussion: a. If NPAT for period under evaluation is not at least a quarter of the industry norm: i. Determine whether the 5 year average is at least a quarter of the industry norm ii. If the 5 year average PM is at least a quarter of the industry norm, then apply the 5 year average to the turnover of year under evaluation (2016 in this case), thus 1.99% x R = R will be the NPAT used. iii. If the PM for the year under evaluation and 5 year average is not a quarter of the industry norm, then determine in what year was the Profit Margin (NPAT/ Turnover) was at least a quarter of the industry norm. iv. Use profit margin percentage of the year when it was at least a quarter of the industry norm and then multiply it by the turnover of the current measured period Example: Year NPAT Turnover Profit Margin 2016 R R % 2015 R R % 2013 R R % 2012 R R % 2011 R R % 5 year average R R % You fall in the manufacturing industry and the industry norm is 5.81%. Therefore a quarter is 1. 45%. Based on the table above, you will note that the last year that the profit margin was at least a quarter of the industry norm was in 2015 with 5%, but the 5 year average is also at least a quarter of the industry norm. Therefore you will use the 5 year average profit margin of 1.99% and multiply it with the turnover for 2016 to determine the NPAT for the current measurement period. (The Turnover for 2016 will be used as it is your current measurement period) e.g. 1.99% x R = R (NPAT). If the year under evaluation and the 5 year average was below the quarter of the industry norm, then you will use % PM, as this is the last year in which the company made at least a quarter of the industry norm (this is referred to the indicative profit margin) thus, 5% x R = R If there is not a year in which your profit margin is at least a quarter of the industry norm or your 5 year average is not a quarter of the industry norm, then you will apply the following: i. Use the industry norm obtained from AVS ii. Take the quarter of the industry norm and multiply it with the turnover of the current financial period (2016 for this example). iii. The value you have calculated is now used as the NPAT e.g. R x 1.45% = R AVSBEEIP AVS 2016 Page 9 of 26

10 SED Target: 1% x R = R (Target) NOTE: Above calculations will also apply where the NPAT of the current financial period is a loss. Y ou will directly apply the calculation where you determine whether the 5 year average is at least a quarter of the industry norm, or identify the indicative profit Examples of Socio-economic development contributions Grants / Donations Examples: Giving money for HIV / Aids training or to schools. Giving educational assistance through bursaries, e.g. paying the school fees of the children of your employees. Giving financial assistance towards housing, transport and healthcare of your own employees which does not form part of their salary package. Support for arts and culture. Benefit factor: 100% Claimable: Full grant/donation amount Proof required: A competent person s report. The report should state the amount received and the percentage of black beneficiaries. Proof of payment is also required Direct costs spent on the socio-economic support of individuals / projects Examples: Travel costs. Accommodation expenses. Amount Claimable: Full expense Benefit factor: 100% Proof: Receipts/ internal accounting records letter of receiving party stating the benefit received and the percentage of black beneficiaries Discount given to individuals / projects as contribution towards socio-economic development. Example: Giving a discount on your normal rental fee to an individual / project where a bus is rented. Or providing a service to a valid individual / project at a discount rate which you don t normally give to customers. Claimable: Discount amount Benefit factor: 100% Proof: Invoice with discount specified, proof of normal discount terms together with a letter from receiving party specifying the amount received as well as percentage of black beneficiaries. AVSBEEIP AVS 2016 Page 10 of 26

11 Overhead costs in supporting individuals / projects for socio- economic development purposes. Example: Telkom expenses on the portion spend on supporting such projects. Claimable: Full expense Benefit factor: 80% Proof: Invoices/ internal accounting records together with a letter from the receiving party specifying the amount received and percentage of black beneficiaries Providing a professional service free of charge. Examples: You are an attorney (person supplying a professional service) and you assist a local crèche with recovering bad debt for free. You can claim your commercial hourly rate Training / mentoring communities to assist them to increase their financial capacity Assisting arts and culture Claimable: Commercial hourly rate Benefit factor: 80% Proof: Hours spent on project. Percentage of black beneficiaries, as well as proof of normal tariffs (Proof of rate per hour) together with a letter from individual / project stating what service has been provided Providing a professional service at a discount Examples: Skills development for the unemployed Training / mentoring communities to assist them to increase their financial capacity You are an attorney (person supplying a professional service) and you assist a local crèche with recovering bad debt at a discount. You can claim the discount rate Claimable: Amount discounted Benefit Factor: 80% Proof: Invoice/ internal accounting records stating the discount, hours spent, percentage of black beneficiaries as well as proof of normal tariffs (Proof of rate per hour) together with a letter from individual / project stating what service has been provided Let your employees productively assist SED individual / project Examples: The local black school has purchased paint from you but you send your team of painters to paint the hospital for free. You can claim the hours they spend doing that. Please keep an attendance register of the employees proving the service AVSBEEIP AVS 2016 Page 11 of 26

12 Claimable amount: Total hours spent x Salary / 160 Benefit Factor: 80% Proof: Attendance registers of employees performing the service. Salary slips of the employees, together with a letter from SED individual / project stating the percentage of black beneficiaries, and the number of hours spent by your employees on the project. 3.2 ENTERPRISE DEVELOPMENT What is Enterprise/Supplier development (ED& SuD)? Enterprise/Supplier Development Contributions monetary or non-monetary contributions carried out for the benefit of value-adding suppliers to the measured entity, with the objective of contributing to the development, sustainability and financial and operational independence of those beneficiaries Beneficiaries Exempted Micro Enterprise (51% black owned / black Women Owned) and Qualified Small Enterprise (51% black owned / black women Owned) What is the impact of Enterprise - & Supplier Development on your scorecard? Generic Enterprises: ED: 5 points (1% of Net Profit after Tax 1 ) SuD: 10 points (2% of Net Profit after Tax 1 ) Qualified Small Enterprises: ED: 5 points (1% of Net Profit after Tax 1 ) SuD: 5 points (1% of Net Profit after Tax 1 ) Can a sole proprietor receive Enterprise development? Yes, as long as he is classified as black. You must ask him / her to complete the DTi affidavit to this effect. Relevant steps will be taken to determine whether he/she is black and a sole proprietor Refer to How to know what NPAT to base the calculation on? page 7 paragraph for calculation of NPAT for this element Examples of Enterprise/Supplier Development Contributions Grants/Donations Examples: Giving money towards projects that assist black owned businesses/supplier with the relevant training which improves the chances for sustainability of the project Giving a grant / donation to a 51% black owned EME/QSE 1 Please note that the calculation of NPAT as explained under SED does also apply here AVSBEEIP AVS 2016 Page 12 of 26

13 Benefit factor: 100% Claimable: Full grant / donation amount Proof: Proof of Black Ownership/ BEE Certificate, proof of amount spent and a confirmation letter from the beneficiary entity, as well as ED/SuD plan Direct costs spent on supporting Enterprise/Supplier development Examples: Infrastructure support Travel costs Accommodation expenses Claimable: Full expense Benefit factor: 100% Proof: Proof of Black Ownership/ BEE Certificate, proof of amount spent and a confirmation letter from the beneficiary entity as well as invoices/ internal accounting records, as well as ED/SuD plan Discount given to Enterprise/Supplier development Example: Giving a discount to a black owned business (different from your normal discount). Providing a service at a discounted rate. Claimable: Discount received above normal discount practice Benefit factor: 100% Proof: Proof of Black Ownership / BEE Certificate, proof of normal discount terms, proof of the discounted amounts, a confirmation letter from the beneficiary entity, as well as ED/SuD plan Overhead costs in supporting Enterprise development Example: Giving the opportunity to a black sole proprietor to start his company on your premises. Claimable: Full expense Benefit factor: 70% Proof: Proof of Black Ownership/ BEE Certificate. Average rental fee of property in area (Letter from property evaluator) and a confirmation letter from the beneficiary entity, as well as ED/SuD plan Providing a professional service at no cost Examples: If you are a lawyer, you could assist such entities pro bono You could, as IT literate person, assist those companies with planning their best IT option Training / mentoring entities to assist them to increase their financial capacity AVSBEEIP AVS 2016 Page 13 of 26

14 Claimable: Commercial hourly rate of professional Benefit factor: 80% Proof: Proof of Black Ownership/ BEE Certificate. Letter from beneficiary entity confirming the services rendered, proof of total hours spent on the project, proof of commercial hourly rate Providing a professional service at a discount Examples: Assisting qualifying entities at a discounted fee Charging them, e.g., R250 versus the R450 per hour Claimable: Discounted amount Benefit Factor: 60% Proof: Proof of Black Ownership / BEE Certificate. Invoice indicating the discounted amount, letter from beneficiary entity confirming the services rendered, proof of total hours spent on project, proof of commercial hourly rate, as well as ED/SuD plan Let your employees productively assist a 51% black owned EME/QSE business Examples: Send your employees to train a 51% black owned EME/QSE business to efficiently use an accounting system A client purchased manufacturing software from you. You sent your employees to assist them in setting up the software. This is not part of your normal practice. Claimable amount: Total hours spent x (Salary / 160) Benefit Factor: 60% Proof: Proof of Black Ownership/ BEE Certificate. Letter from the beneficiary entity which confirms the contribution, proof of the total hours spent on the project, proof of salary of employees who gave assistance, as well as ED/SuD Plan Interest-Free Loan with no security Examples: 51% black owned EME/QSE business client is delivering on a tender at a municipality, and you know that the municipality will only pay after 4 months. Your normal credit terms are only 30 days. You can thus claim for the additional credit terms (an additional 90 days.) You are lending the money without asking for any security. Claimable amount: Amount outstanding multiplied with the number of months outstanding / 12 Benefit Factor: 70% Proof: Proof of Black Ownership/ BEE Certificate. Proof of normal credit terms i.e. letter from measured AVSBEEIP AVS 2016 Page 14 of 26

15 entity, confirmation letter from beneficiary entity, agreement, loan amount and internal accounting records which proves the extended credit terms, as well as ED/SuD plan Standard Loan to Category A businesses Examples: Granting a loan to the business on a normal basis, where security and payment terms are required. This would be eg. The same as the business could get from a bank. Claimable amount: Amount outstanding multiplied by the number of months outstanding / 12 Benefit Factor: 50% Proof: Proof of Black Ownership / BEE Certificate. Loan amount and internal accounting records which proves the amount and months outstanding Lower Interest Rate Claimable amount: Amount owed Benefit Factor: (Prime Actual Rate)/Prime as a Percentage Proof: Proof of Black Ownership/ BEE Certificate. Agreement indicating the interest, internal accounting records, prime rate applicable. Applicable during the measured period. ED/SuD plan also required Paying 51% black owned EME/QSE business faster than 15 days Examples: Paying certain suppliers or a specific supplier within a few days even though the normal payment cycle is longer. Please note that your payment cycle should be at least 15 days. Claimable amount: Amount calculated using the benefit factor Benefit Factor: Percentage being 15 days less number of days from invoice to payment. Maximum points that can be scored is 15% of 10 points Proof: Proof of Black Ownership / B-BBEE Certificate. Invoices and proof of payment, as well as ED/SuD plan When your payment cycle is more than 15 days: Pay 51% black owned EME/QSE business within 4 days (e.g. R VAT exclusive) (15 4) = 11% R x 11% = R1 100 x 15% = R PREFERENTIAL PROCUREMENT AVSBEEIP AVS 2016 Page 15 of 26

16 Preferential procurement refers to purchases from, and getting the benefit from purchasing at businesses with BEE certificates which are valid anytime from the first day of the financial year under evaluation. The amounts you purchase with your suppliers during that period are taken into account. All Amounts are VAT exclusive What is the impact on your scorecard? Generic Enterprises: 25 points Qualified Small Enterprises: 20 points Generic Enterprises: Receive 5 points for purchasing at least 80% of total procurement from Empowering businesses with BEE certificates which are valid anytime during the measured financial period. This includes the money spent with exempted enterprises (DTI Affidavit is required). Receive 3 points for purchasing at least 15% of total procurement from Empowering Qualifying Small Enterprises (QSE) with valid BEE certificates. Black ownership is not a requirement. Receive 4 points for purchasing at least 15% of total procurement from Exempted Micro Enterprises (EME) with valid BEE certificates. Black ownership is not a requirement. Receive 9 points for purchasing at least 40% of total procurement from Empowering black owned businesses (51% black ownership) Receive 4 points for purchasing at least 12% of total procurement from Empowering black women owned businesses (30.1% black ownership) Qualified small enterprises: Receive 15 points for purchasing at least 60% of total procurement from Empowering businesses with BEE certificates which are valid anytime during the measured financial period. This includes the money spent with exempted enterprises (DTI Affidavit is required). This is all spend Receive 5 points for purchasing at least 15% of total procurement from black owned businesses (51% black ownership) AVSBEEIP AVS 2016 Page 16 of 26

17 3.3.4 What does Empowering mean? Example Supplier has a BEE recognition level of 60% and is an empowering supplier; Goods Purchased: R Then the contribution towards your own BEE expenditure is: R1 000 x 60% = R600. If they were not an Empowering supplier, then the recognition is seen as 0%. AVSBEEIP AVS 2016 Page 17 of 26

18 3.3.5 What is a BEE recognition level? It is the percentage benefit you will receive by purchasing from a supplier with BEE certificates. Below is the BEE contribution status table: BEE Status Qualification BEE procurement recognition level Level One Contributor 100 points on scorecard 135% Level Two Contributor 95 but <100 on Scorecard 125% Level Three Contributor 90 but <95 on Scorecard 110% Level Four Contributor 80 but <90 on Scorecard 100% Level Five Contributor 75 but <80 on Scorecard 80% Level Six Contributor 70 but <75 on Scorecard 60% Level Seven Contributor 55 but <70 on Scorecard 50% Level Eight Contributor 40 but <55 on Scorecard 10% Non-Compliant Contributor 40 on Scorecard 0% Scenario: Suppose you purchase goods of R from a supplier with a level 3 BEE certificate and who counts as an empowering supplier. Your contribution then becomes: R x 110% = R (BEE procurement spend) What can be excluded from procurement? Salaries, wages, director emoluments Public sector procurement (Eskom) Pass through third party procurement (The purchase does not reflect on your financial statements) Imports: Not manufactured in SA or with a different brand (logo) or specification Intra-group procurement (Only applicable when doing a consolidated scorecard) Empowerment related procurement and investments, loans and donations to enterprise development beneficiaries. 3.4 SKILLS DEVELOPMENT (Training on black people) What is Skills Development? It is training or training programmes aimed at developing skills of black people. This to be done in the financial period What is the impact of Skills Development on your scorecard? Generic Enterprises: 20 points Qualified Small Enterprises: 25 points AVSBEEIP AVS 2016 Page 18 of 26

19 3.4.3 Generic Scorecards: 8 Points: spend 6% of Leviable Amount (LA) on Black People 4 Points: spend 0.3% of LA on black employees with disabilities 4 4 Points: Number of black people participating in learnerships, apprenticeship or internships. Target: 2.5% of employees 4 Points: Number of black unemployed people participating in training specified in the learning programme matrix. Target: 2.5% of employees If you don t know what Leviable Amount is, please ask your Financial Manager what your Leviable Amount was for the financial year under evaluation QSE Scorecards 15 Points: spend 3% of Leviable Amount (LA) on Black People 7 Points: spend 1% of Leviable Amount (LA) on Black Females 3 Points: spend 0.15% of LA on black employees with disabilities What is a learnership and what is the benefit? Learnerships are based on legally binding agreements between an employer, an employee and a training provider (SETA) Requirements to claim any points under Skills Development 1. Compliance with the Skills Development Act and Skills Development Levies Act. 2. Registration with an applicable SETA. 3. Workplace skills plan and annual training report 4. Programmes specifically for Blacks for developing priority skills General Tips: Keep schedules and training rosters as proof of training received. Employees should sign the document. Document to prove Race, Gender and ID number of employees trained. Keep proof of in-house training given to employees. This is also applicable to 1 on 1 training. Keep agenda and training materials. Keep proof of expenditure on training What do I need to keep track of? Cost of training materials. Cost of trainers + training facilities + costs of catering. Scholarships and bursaries. Course fees + administration costs. Accommodation and Travel expenses. AVSBEEIP AVS 2016 Page 19 of 26

20 Salaries and wages: Employees studying at accredited institutions (e.g. University/College) Important for Generic Enterprises Evaluations will be done by the targets being broken into specific criteria according to the different race sub-groups within the definition of black in accordance with the Regulations of Employment Equity Act and Commission of Employment Equity report requirements on equitable representation and weighted accordingly. 3.5 MANAGEMENT AND CONTROL The Board, Executive directors, Executive Management and line functional management of the company What is the impact of Management and control on your scorecard? Generic Enterprises: 19 points Qualified Small Enterprises: 15 points Generic Enterprises: Management Control Board Participation Target Points Exercisable voting rights Black Board Members 50% 2 Black Female Board Members 25% 1 Black Executive Directors 50% 2 Black female Executive Directors 25% Other Executive Management Black Executive Management 60% 2 Black Female Executive Management 30% Senior Management Black Senior Management 60% 2 Black Female Senior Management 30% Middle Management Black Middle Management 75% 2 Black Female Middle Management 38% 1 AVSBEEIP AVS 2016 Page 20 of 26

21 Junior Management Black Junior Management 88% 1 Black Female Junior Management 44% Disabled Employees Black Employees with disabilities 2% Qualified Small Enterprises: Management Control Executive Management Target Points Black Executive Management 50% 5 Black Female Executive Management 25% Senior, Middle and Junior Management Black Senior, Middle and Junior Management 6 60% Black Female Senior, Middle and Junior Management 2 30% Generic Enterprises: Compliance targets for Senior Management, Middle Management and Junior Management are based on overall demographic representation of black people as defined in the Regulations of Employment Equity Act and Commission on Employment Equity Report Definitions Executive Management include other executive management as well i.e. old Senior Top and Other Top Management. Senior, Middle and Junior refers to the Senior, Middle and Junior Management positions as defined by the EEA Executive Management (previously Senior Top Management) positions include the following: Chief Executive Officer, Chief Operating Officer, Chief Financial Officer and other Executive Managers that serve on the Board of Directors. Other Executive Management (previously Other Top Management) positions include all executive management that do not serve on the board, such as human resource executive, transformation executive and other people holding similar positions. AVSBEEIP AVS 2016 Page 21 of 26

22 3.5.6 Who needs to complete the EEA2 and EEA4 forms? Please note that the EE Act has been amended. The stipulations below apply: The turnover thresholds applicable to companies with fewer than 50 employees, found in Schedule 4 of the Act, which is used as one of the criteria to determine whether an employer is designated, have been amended to take into account inflationary adjustments since the Act was first promulgated in Please refer to Schedule 4 below: Sector Old Threshold Total Annual Turnover New Threshold Total Annual Turnover Agriculture R2 million R6 million Mining and Quarrying R7.7 million R22.5 million Manufacturing R10 million R30 million Electricity, Gas and Water R10 million R30 million Construction R5 million R15 million Retail and Motor Trade and Repair R15 million R45 million Services Wholesale Trade, Commercial Agents R25 million R75 million and Allied Services Catering, Accommodation and other R5 million R15 million Trade Transport, Storage and Communications R10 million R30 million Finance and Business Services R10 million R30 million Community, Special and Personal Services R5 million R15 million Should your turnover be in line with the new threshold, then you have to submit the EEA2 reports on a yearly basis. Section 20 sees the introduction of a clause which allows the Director General to apply directly to the Labour court to impose a fine in accordance with Schedule 1 on an employer who fails to prepare or implement an employment equity plan in lines with Section 20, without the option of first obtaining a written undertaking to comply or issuing a compliance order. This has been introduced to highlight the importance of preparing an implementing an employment equity plan, which, in the past, was seen by some employers as merely a suggestion rather than a legal imperative with paper compliance being the order of the day. This too, will drive the principles of the B-BBEE Act and Codes of Good Practice. Previous Contravention Contraventions of any provisions of sections 16, 17, 19, 22, 24, 25, 26 and 43(2) Contraventions of any of the provisions of sections 20, 21, 23 and 44(b) No previous contravention R The greater of R or 2% of the employers turnover A previous contravention in R The greater of R or 4% respect of the same provision A previous contravention within the previous 12 months or two previous contraventions in respect of the employers turnover R The greater of R or 6% of the employers turnover AVSBEEIP AVS 2016 Page 22 of 26

23 of the same provision within three years Three previous contraventions in respect of the same provision within three years Four contraventions in respect of the same provisions within three years Schedule 1 R The greater of R or 8% of the employers turnover R The greater of R or 10% of the employers turnover Section 21 which deals with the designated employer s duty to submit an EEA2 report to the Director General has changed significantly. In the past, there was a distinction made between reporting periods of Large employers (150+ employees) and Small employers (0 149 employees). With the amendments, all employers must now submit an EEA2 and EEA4 report every year, by the first working day of October or on such other date which may be prescribed. Also, an employer who becomes designated on or after the first working day of April, but before the first working day of October, must submit its first report by the first working day of October the following year, or on such other date that may be prescribed. Please see a worked example of how this will affect your company below: For example: * If you become designated on 18 June 2014, you must submit your report by the first working day of October 2015, or on such other date that may be prescribed * If you become designated on 15 March 2014, you must submit your report by the first working day of October 2014, or on such other date that may be prescribed Furthermore, the amendments to this section stipulate that should you not be able to report by the first working day of October, you are obliged to notify the Director General in writing by the last working day of August in the same year and give reasons for your failure to report by the deadline Another significant amendment to this section is that the Director General may apply to the Labour Court to impose a fine in accordance with Schedule 1 (see table above) if the employer: a. Fails to submit a report in terms of this section; b. Fails to notify and give reasons to the Director General for failing to report by the deadline; c. Has notified the Director General of failure to submit, but the reasons are false or invalid. Thus, to avoid unnecessary complications, reporting by the deadline is paramount. 3.6 OWNERSHIP What is the impact of ownership on your scorecard? Generic Enterprise: 25 points Qualified Small Enterprise: 25 points AVSBEEIP AVS 2016 Page 23 of 26

24 Target Points Exercisable voting rights In the hands of black people 25% + 1 vote 4 In the hands of black woman 10% Economic Interest In the hands of black people 25% 4 In the hands of black woman 10% 2 In the hands of black natural people Employee Ownership trusts/broad Based Ownership schemes/co-ops 3% 3 Black Designated groups New Entrants 2% Realisation points Net Value Refer to explanation below Net value: What are the Net Value points? The company can receive 8 points when a proportionate net economic interest accrues in the hands of the black shareholders, after the deduction of monies owed by these black shareholders. This is a crucial part of the ownership scorecard as the subminimum is based on this criteria. 3.8 Qualified Small Enterprise Ownership: Target Points Exercisable voting rights In the hands of black people 25% + 1 vote 5 In the hands of black woman 10% Economic Interest In the hands of black people 25% 5 In the hands of black woman 10% 2 New Entrants 2% Realisation points Net Value Refer to explanation under the Generic section 8 AVSBEEIP AVS 2016 Page 24 of 26

25 4. Frequently Asked Questions 4.1 Financial Statements Audited and signed financial statements to be used for verification (Signed by the director/ member/ partner as well as auditors) An audit cannot be scheduled where there are no signed and audited financial statements available The most recent audited and signed financial statements have to be used for the verification process. The period must be for 12 months. 4.2 What happens if your auditors are not yet finished with your audited financial statements? Signed Management Accounts for the financial period can be used. We will also conduct certain checks should the need arise Management Accounts needs to be signed by a responsible person representing the entity as well as a letter on the company letterhead confirming that the values used for the verification process are true and correct. 4.3 ID copies All ID copies submitted for verification need to be clear (All details on the ID copy must be visible) and certified by a commissioner of oaths (Stamps must be clear and indicating that it is a true copy of the original document) 4.4 Verification process Once the pre-audit appointment has taken place and the analyst has worked through the information you have prepared for the pre-audit appointment, you will be giver a time period to submit your portfolio of evidence to the analyst Please note that we provide a period of 3 months to compile the portfolio of evidence after signature The audit will be scheduled as soon as your appointed analyst has worked through your portfolio of evidence If, after 3 months no portfolio of evidence has been submitted, then your file will be closed It is therefore critical that you complete the requested information beforehand. Thank you We would like to take this opportunity of assuring our clients and potential clients our best attention at all times. AVSBEEIP AVS 2016 Page 25 of 26

26 Should you require any additional information regarding the B-BBEE Verification and Training, please do not hesitate to contact us. AVSBEEIP AVS 2016 Page 26 of 26